Category Archives: Uncategorized

No tax Deadlines from January 20, 2020-July 10, 2023

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The US Court of Federal Claims ruled that due to COVID pronouncements in conjunction with Section 7508A of the Internal Revenue Code which deals with tolling statutes during disasters. President Trump’s declaration for COVID was made January 20, 2020 and was not removed until done so by President Biden on May 11, 2023. Add 60 days to it and you have July 10, 2023 as the operative date for filing any return during that period. The IRS has not and probably will not acquiesce to this decision. However, if you have a client being audited for 2019-2022 years or paid those taxes late, they might get a break from this decision. You can state that the interest for that period 1/20/20-7/10/23 is unagreed and any penalties are not assessable if accruing during that period of time.

Little Known provision could get Revenue Agent in hot water

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Section 7214(b) reads as follows: Any internal revenue officer or employee interested, directly or indirectly, in the manufacture of tobacco, snuff, or cigarettes, or in the production, rectification, or redistillation of distilled spirits, shall be dismissed from office; and each such officer or employee so interested in any such manufacture or production, rectification, or redistillation or production of fermented liquors shall be fined not more than $5,000.

Note the word “shall” be dismissed from office. There’s no way around that. Notice the word “indirectly”. Let’s say a Treasury employee buys almost any mutual fund that owns stock. Chances are one of the stock holdings is Altria or ImBev Altria make cigarettes and is one of the largest distillers in the world. ImBev owns Budweiser which in turn owns lots of other breweries and distilleries. So, simply by owning an interest in a mutual fund that invests in these or other similar companies, is a mandatory firing offense and gets you fined. And remember these mutual fund companies are trading all of the time. So in a moment in time, they might own one of these dreaded stocks.

So, the moral of the story is that if you are an IRS employee, look at what these mutual funds invest in. There are some mutual fund companies that are religious based and do not invest in alcohol or tobacco producing stocks. They returns are not as high, but you can keep your job.

2025 is inching closer

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All of the Trump era tax cuts expire in 2025. One of the primary ones is the Estate Tax Exemption amount was raised from $5 Million per person to $10 Million per person ($20 Million per couple). If you’re estate is above $10 Million, now might be a good time to start making gifts. The IRS has issued guidance stating that if you made gift before 2025, the gift will be honored. (Of course Congress can always change that). There are a number of Trust options available to you to allow you to keep the income from the property and give away a remainder. Also with interest rates jumping up 1000% in 2022 (0.44% to 4.8%) , some planning techniques should be explored sooner rather than later as the Federal Reserve continues to tighten the money supply.

Weed Store Whacked by Tax Court

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In San Jose Wellness v. Commissioner 156 TC 4 (2021), the Court ruled that depreciation and charitable deductions made by the business were not deductible.
Section 280E reads:
“No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by Federal law or the law of any State in which such trade or business is conducted.”

The Tax Court opined that since marijuana is a controlled substance, that 280E applied to the pot store. Thus essentially, Pot stores are taxed on their gross income.
Remarkably though Pot stores can deduct costs of goods sold however. CHAMP v. Commissioner 128 TC 173 (2007).

Student Loan Forgiveness

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While the details are still sketchy, persons earning less than $125,000 may be permitted to have their student loan interest forgiven. The press release mentioned household income. So, it is unclear what that means. However, if a child is not counted as a dependent on your return and files a separate return, and if they earn under $125,000 (for one year when they apply), they get their student loan forgiven up to $10,000 ($20,000 for Pell Grant recipients). So, once regulations are released, you might want to revisit this issue when you consider declaring that recent grad as a dependent. You know, the one who is lounging in your basement.